1. POST THE GAZETTE OF THE ACSC
THE SALIENT FEATURES OF THE CONSTRUCTION SECTOR CODE
POST THE GAZETTE OF THE ACSC
Presented by
Sthembiso Cele (Mr) - CSCC Senior Manager – Technical Compliance & Monitoring
Num Construction Charter Workshop
August 2018
ELIJAH BARAYI MEMORIAL TRAINING CENTRE - MIDRAND

2. THE ROLE OF THE CSCC
The CSCC is the EXECUTIVE AUTHORITY charged with :
Entrusted with OVERSEEING and MONITORING the IMPLEMENTATION of the Construction Sector Codes (CSC) of Good Practice by the Industry.
Through industry programmes, FACILITATE the achievements of sector empowerment TARGETS. Sharing information with members of the Construction Industry, appropriate Ministries and SOEs, Verification Agencies, CIDB, etc
Provide necessary GUIDANCE & BEST PRACTICE NOTES on the interpretation of the principles of the Construction Sector Code.
LIAISON with and reporting to the regulatory stakeholders on the annual measurement of the construction sector code - BBBEE Advisory, DPW and the DTI .
Creation of RELIABLE and ACCURATE industry specific empowerment data

3. THE CHRONOLOGICAL ARRANGEMENT OF THE AMENDED CONSTRUCTION SECTOR CODE
INDEX AND CONTENT
Preamble (1)
Legacy & Industry Commitment (1.1)
Premise of departure (1.2)
Strategic Objectives (1.4)
Monitoring & Compliance (1.5)
Objectives Of the Statement (1.6)
Key Measurement Principles (2)
Scope Of Application (3)
Priority Elements, Sub-Minimums & Discounting (4)
EME & QSE Eligibilities (5)
Start-Up Enterprises (6)
Measurement of Large Enterprises (7)
Large & QSE Scorecards (8)
Enhanced Recognitions (9)
Effective Date & Transition (10)
Verification Of CE (11)
Adjustment Of Thresholds (12)
Duration Of Sect Codes (13)
STATEMENT CSC 100 – Ownership
STATEMENT CSC 200 – Management Control
STATEMENT CSC 300 – SKILLS DEVELOPMENT
STATEMENT CSC 400 – ESD
STATEMENT CSC 500 – SED

4. THE OLD COMPARED TO THE NEW : A COMPARATIVE ANALYSIS
The Old Sector Code – Gazette (Vol 528) 5 June pages long Seven Elements of the Scorecard Differentiates between BEPs and Contractors only Sets out objectives & monitoring Contractor EMEs up to R 5million BEP EMEs up to R1.5 million
Notable Changes – Gazette 41287
Now over 85 pages long
5 Elements of the Scorecard
Expands the Scope of Application – Include Manufacturers
Enhancement & Discounting also applicable to EMEs
Elaborative and detailed in the measurement principles & weighting points
Places and emphasis on Monitoring & Compliance

5. OVERVIEW & BRIEF BACKGROUND
WHY CONSTRUCTION SECTOR TRANSFORMATION
PREAMBLE - Recognizes the historical Legacy
Despite significant progress since the establishment of a demographic government in 1994, South African society is characterized by racially based income and social service inequalities. Consequently, the vast majority of South Africans remain excluded from ownership, control and management of productive assets and from access to training in strategic critical skills.
The Broad-Based Black Economic Empowerment Act (No. 53 of 2003) establishes a legislative framework for the promotion of B-BBEE, provides for the gazetting of transformation charters and empowers the Minister of Trade and Industry to issue codes of good practice;
The National Development Plan aims to eliminate poverty and reduce inequality by According to the plan, South Africa can realize these goals by drawing on the energies of all its people, growing an inclusive economy, building capabilities, enhancing the capacity of the state, and promoting leadership and partnerships throughout society;

6. OVERVIEW & BRIEF BACKGROUND
This Construction Sector Code seeks to support the objectives of the Act as amended from time to time and the objectives of the National Development Plan.
Believes that positive and proactive response through the implementation of the Construction Sector Code would address inequalities in the Construction Sector, unlock the sector’s potential and enhance its growth. As such the Construction Sector Code supports:
The introduction of Economically Active Population (EAP) targets which aims to address the unequal representation of race sub-groups participating in the industry;
The continued research by the CSCC on how to create a Construction Sector that benefits the economy at large through supporting and building capacity in small enterprises including black professional service providers;
The set aside of minimum levels of procurement spend from Suppliers that are at least 51% Black Owned or 35% Black Women Owned or 51% Black Designated Groups owned and standardize industry-wide preferential procurement methodologies;

7. SECTOR CODE STRATEGIC OBJECTIVES
The Code in general seeks to support all the objectives of Transformation and in particular aims to:
Achieve a substantial, meaningful and accelerated change in the racial and gender composition of ownership, control and management in the sector;
Promote the effective advancement of employment equity in the sector and adherence to principles of non-racialism and non-sexism and also addresses the underrepresentation of certain race groups relative to the Economic Active Population targets with specific focus on all levels of management;
Address Skills Development in a manner that accelerates the advancement of Black People, black women and Designated Groups with particular emphasis on learnerships, technical and management training;
Increase the procurement of goods and service by the private sector and public sector from entities that are at least 51% Black Owned, 35% Black Women sector.  

8. SECTOR CODE STRATEGIC OBJECTIVES
Enhance Supplier and Contractor Development in the core value chain of the construction industry that leads to sustainable empowerment for Qualifying Supplier Development Beneficiaries;
Contribute to the creation of substantial black owned entities and black industrialists in the Construction Sector through industry wide Supplier and Contractor Development initiatives;
Increasing Preferential Procurement spend on local companies thereby increasing local job creation aligned to the objectives of the National Development Plan;
Provide the Construction Sector on-going qualitative and quantitative method for monitoring and evaluating the progress of enterprises toward B-BBEE and thereby contribute to ending the malpractice of fronting; and
Introduce compulsory reporting and engagement with the BEE Commissioner to monitor progress of enterprises toward B-BBEE.

9. RESPONSIBILITY FOR MONITORING AND COMPLIANCE
THE CONSTRUCTION SECTOR CHARTER COUNCIL (CSCC) – responsible for the MONITORING FUNCTION has commenced work :
Relevant Provision
Progress to date
Oversees and monitor the implementation of the Construction Sector Code. Providing necessary links to relevant government institutions;
Written Correspondence forwarded to the Minister’s Office – Directive for DPW Family Public Entity & Councils reporting. April 2019 deadline.
Annual baseline study as a way to review quantitative and qualitative progress towards transformation in the Construction Sector;
April EXCO resolution – Confirmation of correspondence to the DTI – Inaugural report in June 2019
COMPULSORY for all verification agencies issuing certificates for companies governed by the Construction Sector Code to annually provide the independently verified scorecard – CSCC
Letters of Undertaking – Already committed over 30 Verification Agencies that ACSC accredited to provide EME, QSE & LE issued BBEE certificates & reports
Through industry programmes, FACILITATE the achievements of sector empowerment TARGETS
Work has commenced – Three (3) meetings with SACPCMP accredited Mentors – For various interventions

10. CERTAIN PRIORITY AREAS OF THE CONSTRUCTION SECTOR CODES
ACCELERATED LEVELS OF BLACK OWNERSHIP
Achieving accelerated, substantial & meaningful racial and gender changes in the ownership patterns
specify the specific measurement principles applicable to various types of Equity Instruments;
Specify the formula for measuring Voting Rights, Economic Interest, and Realisation points.
EQUITY IN EMPLOYMENT PRACTICES
Strive to promote effective employment equity in the under-represented sections of management in measurement entities. As such improving prospects of gaining Management control by black people within Measured Entities.
ACCELERATED SKILLS DEVELOPMENT
Advancing black participation in learnerships, mentorship & technical management roles for designated beneficiaries and target groups

11. EFFECTIVE DATE AND TRANSITIONAL ARRANGEMENTS
New Provisions & Insertions
Implications / Rationale
When the Amended Construction Sector Codes are published, Measured Entities may elect to re-do the audit carried out for their current valid scorecard that was done under the provisions of Amended Generic Codes of Good Practice; under the provisions and principles of the Amended Construction Sector Codes. This audit will be done for the same financial period as their current scorecard, but under the measurement principles of the Amended Construction Sector Codes.
The Old 2009 Construction Sector Code provided for a twelve (12) months transitional period for phasing in and implementation. The revised construction sector code will make NO provisions for a transitional period. This means that once gazetted, then the Newly revised Construction sector Code will apply and be effective immediately. However, CSME that have valid B-BBEE certificates issued in terms of the Amended Generic Codes of Good Practice may elect to retain their measurement under the Amended Generic Codes until the current scorecard expires, thereafter the Amended Construction Sector Codes must be used, irrespective of the financial period used in the previous audit.

12. MEASUREMENT OF EMEs and QSEs
New Provisions & Insertions
Implications / Rationale
This is meant to ensure that, amongst other things :
Fraud and circumvention is prevented and mitigated pro-actively,
To provide end user (procurement practitioners) with a significant degree of comfort about the compliance in respect of the enhancement and/or discounting.
As a matter of PRINCIPLE, the ACSC does not promote the use of an AFFIDAVIT as a suitable evidence of BLACK OWNERSHIP and EME status.
However, an exception exist in the following circumstances ;
EMEs whose total annual revenue is less (<) than R1.8 million (For BEPs) and R3 million (For Contractors & Manufacturers /Suppliers) and DO NOT elect for enhancement.
NO BLACK OWNED QSE AFFIDAVIT is applicable in the ACSC

13. Implications / Rationale
VERIFICATION OF CONSTRUCTION ENTERPRISES AND THE SUPPORT OF SMALL ENTERPRISES
New Provisions & Insertions
Implications / Rationale
The CSCC in consultation with and as approved by the dti will post such nominal fees on the website. Agencies that are prepared to perform this service, will post their contact details on the Construction Sector Charter Council web-site. In addition, Large Enterprises will be encouraged to fund this nominal fee for small businesses as part of their Supplier Development programmes. This has already been included in the Supplier Development Contribution clause
Verification shall be performed by B-BBEE verification professionals or rating agencies accredited by SANAS or when applicable a B-BBEE Verification Professional Regulator appointed by the Minister of Trade and Industry for the accreditation of verification agencies or the authorization of B-BBEE verification professionals. In view of the fact that EME’s and QSE’s are expected to be verified for compliance with the 40% Skills Development element in order to maintain their levels as provided for under paragraph above, small black-owned emerging companies have access to B-BBEE verification agencies that will limit their fee for this service at a nominal value.

14. SKILLS DEVELOPMENT RELATED MATTERS
Rational for Skills Development Measurement must ;
Contribute to the achievement of the country’s economic growth and social development goals that will enrich the creation of decent work and sustainable livelihoods.
Promote the development of an industrial skills base in critical sectors of production and value-added manufacturing, which are largely labour-intensive industries.
Support Professional, Vocational, Technical and Academic Learning programmes, achieved by means of professional placements, work-integrated learning, Apprenticeships, Learnerships and Internships, that meet the criteria needs for economic growth and development.
Strengthen the skills and human resource base by encouraging the support of skills development initiatives with an emphasis on skills development and career pathing for all working people in order to support employment creation.
Recognisable Skills Development Expenditure includes any Legitimate Training Expenses incurred for any Learning Programme offered by a Measured Entity to Black People.
Skills Development Expenditure arising from Informal training or Category F and G Learning Programmes under the Learning Programmes Matrix cannot in aggregate represent more than 35% of the total value of Skills Development Expenditure.

15. SKILLS DEVELOPMENT RELATED MATTERS
SOME AREAS OF CONFUSION
JUNIOR MANAGEMENT CATEGORY IN
Where a Measured Entity does not distinguish between Junior, Middle & Senior Management – then the weighting points are allocated to the Black Management category (3.7 of Statement CSC300)
SALARIES & WAGES
Salaries OR Wages - Paid to Employees of the ME participating as a LEARNER only constitute SD expenditure ONLY if the Learning Programme is a category B, C, or D
EXCLUDED SECTORAL MANDATORY TRAINING
Limited to Site, project or safety inductions, toolbox talk, Operator re-certification.
WSP/ATR REPORTING REQUIREMENTS
Therefore, to the extent that WSPs and ATRs are already a requirement of legal reporting in the SETAs and Department of labour, IT IS NOT necessary for EMEs and QSEs in this sector code to submit these, unless they fall within the applicable thresholds.
CRITERIA FOR OFFICE BASED EMPLOYEES
When measuring Management Control and Skills Development elements, reliance is to be placed on the Measured Entity’s Human resource plan, payroll and role designation for purposes of determining on-site from office based employees. The same applies to learners enrolled by the Measured Entity.

16. LEGITIMATE SD TRAINING EXPENSES
New Provisions & Insertions
Implications / Rationale
DO NOT REWARD A FISH FOR SWIMMING
Legitimate Training Expenses include but is not necessarily limited to:
6.1.1 Costs of training materials;
6.1.2 Costs of trainers;
6.1.3 Costs of training facilities including costs of catering;
6.1.4 Scholarships and bursaries;
6.1.5 Course fees;
6.1.6 Accommodation and travel; and
6.1.7 Administration costs such as the organization of training including, where appropriate, the cost of the Measured Entity of employing a Skills Development facilitator or a training manager.
6.1.8 Funding and support of research at tertiary institutions aimed at improving performance of the Construction Sector.

17. TARGETS FOR BLACK OWNERSHIP
Compared to the target of 25.1% provided for in the Amended Generic BBBEE codes, which is reviewable over a period of 10 years, the targets for black ownership in the construction industry is immediately set at 32.5 % and 35% after 4 years f
The target of 32.5% in 1 – 4 year & 35.% after 4 years with great emphasis being placed on the economic interests of black designated groups, namely:
o Black women, youth and the disabled,
o Black participants in Employee Share Ownership Schemes (ESOPs),
o Black people in broad based ownership schemes,
o Black people in co-operatives.
Consequently, a total of 31 weighting points have been allocated on this element with higher weighting bonus (4), also allocated for exercisable voting rights for black people and black women.

18. BROAD-BASED OWNERSHIP SCHEMES AND EMPLOYEE SHARE OWNERSHIP SCHEMES (ESOPS)
Black Participation in Broad-Based Ownership Schemes and Employee Share Ownership Programmes holding rights in a Measured Entity may contribute:
A maximum of 40% of the total points on the Ownership scorecard of the ME if they meet the qualification criteria set out in Annexure CSC100(B) and Annexure100(C) or
100% of the total points on then Ownership scorecard of the ME if then meet the additional qualification criteria set out in Annexure CSC100(B) and Annexure 100(C)

19. RULES FOR BROAD-BASED OWNERSHIP SCHEMES ANNEXURE CSC100(B)
The Management Fees of the scheme must not exceed 15% of the Economic Interest received by the scheme in any year;
The constitution of the scheme must record the rules governing any portion of Economic Interest received and reserved for the future distribution or application;
A written record of the name of the Participants or the use of a defined class of natural person satisfies the requirement s for identification;
A written record of fixed percentages of claim or the use of a formula for calculating claims satisfies the need for defining proportion of benefit; and
The constitution of the scheme must define the Participants and the proportion of their claim to receive distributions;
The Fiduciaries of the scheme must have no discretion on the mentioned terms of the constitution;
At least 85% of the value of the benefits allocated by the scheme must accrue to Black People;

20. RULES FOR BROAD-BASED OWNERSHIP SCHEMES ANNEXURE CSC100(B)..Conti..
At least 50% of the fiduciaries of the scheme must be Black People and at least 25% must be Black women;
The Chairperson of the scheme must be independent;
The constitution or other relevant statutory documents of the scheme must be made available, on request, to any Participant in an official language in which that person is familiar;
The scheme fiduciaries must make available the annual financial reports of the scheme to Participants upon request.
On winding-up or termination of the scheme, all accumulated Economic Interest must be transferred to the beneficiaries or an entity with similar objectives that complies with the rules for Broad-Based Ownership Schemes.
The fiduciaries of the scheme must complete an annual declaration that the scheme was created, managed and operated in accordance with its stated constitution and that the scheme does not seek to circumvent the intention of the Act and the Construction Sector Codes.

21. RULES FOR EMPLOYEE SHARE OWNERSHIP SCHEMES ANNEXURE CSC100(C)
The constitution of the scheme must define the Participants and the proportion of their claim to receive distributions;
A WRITTEN RECORD of the name of the Participants or the use of a defined class of natural person satisfies the requirement for identification;
A WRITTEN RECORD of fixed percentages of claim or the use of a formula for calculating claims satisfies the need for defining proportion of benefit; and
The fiduciaries of the scheme must have no discretion on the above mentioned terms of the constitution; and
The Participants must take part in:
Appointing at least 50% of the fiduciaries of the scheme;
Managing the scheme at a level similar to the management role of shareholders in a company having shareholding;

22. RULES FOR EMPLOYEE SHARE OWNERSHIP SCHEMES ANNEXURE CSC100(C)…Cont…
The constitution, or other relevant statutory documents, of the scheme must be made available, on request, to any Participant in an official language in which that person is familiar;
The scheme fiduciaries must present the financial reports of the scheme to Participants yearly at an annual general meeting of the scheme; and
All accumulated Economic Interest of the scheme is payable to the Participants at the earlier of a date or event specified in the scheme constitution or on the termination or winding-up of the scheme.
The fiduciaries of the scheme must complete an annual declaration that the scheme was created, managed and operated in accordance with its stated constitution and that the scheme does not seek to circumvent the intention of the Act and the Construction Sector Codes.

23. Implications / Rationale
OWNERSHIP AND CONTROL
New Provisions & Insertions
Implications / Rationale
The Generic Codes of Good Practice sets the Ownership target at 25.1% - The sector specific needs for ownership is increased from 30% to 35% as a way of radical economic transformation. Emphasis has been placed on the enhancement of BLACK WOMEN and BLACK YOUTH – Including Employees through the Broad Based Ownership Employee Schemes.
Compared to the Old Codes – the new targets for black ownership are at :
Measurement
Target
Voting Rights / Economic Interests
32.5 % Immediately
35.00 % (After 4 years)
Black Women
10.00%
Employees
10.00% ring Fenced

24. OWNERSHIP MEASUREMENT OF BEPs
New Provisions & Insertions
Implications / Rationale
Therefore when measuring the black ownership of any BEP, where the measured entity does not meet the requirements of above, only 50% of the black ownership of those owners who do not meet the requirement of may be included in the total measurement of black ownership in the measured entity. For the avoidance of doubt, Executive Management in this context is defined as “Top Management” in terms of the Employment Equity Regulations and include the ‘Executive Directors’ and ‘Other Executive Management’ of the Measured Entity.
New requirements for BEP Ownership recognition is that at least MORE than 50% of the total ownership of the Measured Entity must be held by INDIVIDUALS who :
Are Professionally registered with any of the statutory professional councils in the BEP environment in South Africa; and at the same time,
Members of the Executive Management of the Measured Entity;

25. Q&A